If you are considering filing for bankruptcy protection, Chapter 13 offers the opportunity to keep your home out of foreclosure and also hold onto other significant assets.
While most Americans tend to gravitate toward Chapter 7 bankruptcies, which wipes out most — but not all — debts, there are advantages to the debt restructuring offered under Chapter 13.
Those filing under Chapter 13 don’t have to go through the humiliation of having their assets sold off, often at a mere fraction of their worth, to satisfy their creditors. Instead, over a three to five year period, they pay all or most of their accrued debts under the oversight of a trustee appointed by the bankruptcy court.
In order to file a petition for bankruptcy, consumers must attend approved credit counseling. Upon completion of the session, they receiver a certification that will allow them to proceed to the next step.
The sessions can get very granular and personal. Debtors have to reveal their true financial picture, laying bare their expenses, debts, income, assets and financial goals.
For those earning more than New Jersey’s median income, a means test is used to compare income and expenses each month. Those with enough left to pay a portion of their unsecured debts, e.g., credit cards, have to use Chapter 13 to file. It requires a level of commitment that some find burdensome.
Trustees collect your payments each month and are responsible for disbursing it to creditors. It can be really tough to have the self-discipline to budget so strictly for as long as five years, but the system also has some built-in protections for emergencies.
For instance, if you get sick and miss work and some payments or have to outlay a large sum toward home or car repairs, the trustee can modify the repayment plan to allow you to catch up later.
Does Chapter 13 sound like a workable solution to your debt concerns? Speak to a New Jersey bankruptcy attorney to learn more about your options.
Source: creditcards.com, “Chapter 13 bankruptcy: How it works,” Susan Ladika, accessed Feb. 03, 2017